Patent Royalties Account For 30% Of A Phone’s Retail Price [Report]

Building a smartphone is no easy task, especially when you consider all the technology inside of it. Safe to say you guys probably know that the technology used in smartphones aren’t 100% the OEMs, right? Chances are certain components are based on technology developed by someone else, and that the OEM licensed it (hopefully) for use in their devices, and in turn pays the patent holder a royalty for using it.

But exactly how much royalty is paid? Well in a book by patent litigators, Joe Mueller and Time Syrett, along with Intel’s VP and Associate General Counsel, Ann Armstrong, it has been found that patents amount for about 30% of a smartphone’s retail price. In their report, The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones (that’s a pretty lengthy title), the authors found that in a hypothetical smartphone that costs $400 in retail, about $120 of that cost is used towards making royalty payments to patent holders.

They based their findings on publicly disclosed information. For example they found that $60 could be paid out in royalties to patent holders that holds the patents for LTE connectivity in smartphones. However the actual component itself costs around $10-$13 to make, meaning that if it weren’t for the royalties, your smartphones could have been priced a lot cheaper than they are today.

However we can see more companies starting to play nice with one another these days, such as Apple and Google’s Motorola who have recently agreed to drop the lawsuits against one another and work on a deal which will satisfy everyone. So what do you guys make of this? Are you shocked that a bulk of your smartphone’s price goes towards paying patent royalties?